Bitcoin Investing Ideas & Tips

Bitcoin Investing Ideas & Tips

Bitcoin has constantly been a source of argument among many investors around the world. While some investors argue for it and consider it a huge source of investment that brings back money, others are very apprehensive about dealing with a currency that seems unclear and not fully understood. But in recent years, this cryptocurrency has had a blockbuster growth that made some big banks start dealing with it. Yet for many investors, Bitcoin can be a complicated investment as it is really expensive, volatile, can’t be purchased through a brokerage account and isn’t backed by a financial institution. In fact, there are a few ways that people can invest in cryptocurrency and even bitcoin, or the technology behind it, without holding any coins themselves. While it might not completely shield investors from cryptocurrency’s trademark volatility, it can give them some protection from loss.

Tip 1: Invest in companies that hold bitcoin or another              cryptocurrency

 

One way to have exposure to bitcoin without holding it is to invest in the stocks of companies that have cryptocurrency related services or hold coins themselves, said Tyrone Ross, an investment advisor and CEO of Onramp Invest, a digital investing platform. These companies include a wide group of publicly traded businesses throughout different sectors that have either added bitcoin to their balance sheet or have services for storing or paying with cryptocurrency.  Recently, companies such as Tesla and MicroStrategy  have directly invested in bitcoin. Tesla bought $1.5 billion worth of bitcoin and said it would soon accept the digital currency as payment for its products. MicroStrategy, an enterprise software company, said it plans to sell $600 million in convertible debt and use the profit to buy bitcoins.

Tips 2: Look at companies with technology related to bitcoin or  blockchain

 

Another way that investors can utilize to reach cryptocurrency is by investing in publicly traded companies that have technology related to trading coins or use blockchain, the technology that bitcoin is built on.

Experts also called out companies such as Square and Paypal that allow users to trade cryptocurrency on their platforms. What's more, companies like Riot Blockchain and GalaxyDigital focus on cryptocurrency and the underlying technology. And, big technology names such as Microsoft, IBM, Google, SAP and Amazon all use blockchain in different parts of their business.

There’s also underlying hardware that people could invest in to reach crypto without holding coins. “Someone could also buy into companies that make graphics processing units (GPUs) which are needed in order for computers to solve the math equations for the blockchain technology,” said Anjali Jariwala, a certified financial planner, CPA and founder of FIT Advisors in Torrance, California.

To be honest, investing in company stock is much easier and likely safer than investing in a cryptocurrency. For one, it can be done through a regular brokerage account that’s held by a financial institution, giving the user added security and ease of use. For example, if you forget the password to a brokerage account, you can reset it – not so if you forget the key to your bitcoin wallet. Still, it may not eliminate volatility, Jariwala said.  

Tip 3: Check out a cryptocurrency fund

 

It’s also possible to invest in funds that hold bitcoin and other cryptocurrencies, according to Doug Boneparth, CFP and president of Bone Fide Wealth in New York.

Currently, there are some players that create bitcoin trusts, he said, pointing to companies such as Grayscale and Osprey that help retail investors navigate cryptocurrency. “Buying it in a fund wrapper is probably more familiar to the retail investor than anything else,” he said. In addition, working with a fund means that you deal with the company that manages the fund for any account questions or information you might need, such as setting a password, tracking gains and losses or gathering documents for filing your taxes.

Furthermore, people could also invest in funds that have exposure to cryptocurrencies and blockchain technology, such as the Ark Next Generation Internet exchange-traded fund, for example. The ETF has exposure to things such as artificial intelligence, big data, cloud computing and blockchain.

Honestly, some investors will still want to hold digital coins on their own. More than a quarter of Americans plan to invest in cryptocurrency this year, according to a February survey of more than 30,000 people conducted by Piplsay Research. In addition, half said that they think investing in cryptocurrency is safe, according to the report.

If you would like to invest directly in bitcoin or another cryptocurrency, experts recommend learning as much as possible first, only investing an amount you’re comfortable losing and holding for the long-term. “The majority of people should be spending more time learning than buying,” Ross said, referring to cryptocurrency.